ATHENS — After violent protests left dozens of buildings aflame in Athens, the Greek Parliament voted early on Monday to approve a package of harsh austerity measures demanded by the country’s foreign lenders in exchange for new loans to keep Greece from defaulting on its debt.

Though it came after days of intense debate and the resignation of several ministers in protest, in the end the vote on the austerity measures was not close: 199 in favor and 74 opposed, with 27 abstentions or blank ballots. The Parliament also gave the government the authority to sign a new loan agreement with the foreign lenders and approve a broader arrangement to reduce the amount Greece must repay to its bondholders.

The new austerity measures include, among others, a 22 percent cut in the benchmark minimum wage and 150,000 government layoffs by 2015 — a bitter prospect in a country ravaged by five years of recession and with unemployment at 21 percent and rising.

But the chaos on the streets of Athens, where more than 80,000 people turned out to protest on Sunday, and in other cities across Greece reflected a growing dread — certainly among Greeks, but also among economists and perhaps even European officials — that the sharp belt-tightening and the bailout money it brings will still not be enough to keep the country from going over a precipice.

Angry protesters in the capital threw rocks at the police, who fired back with tear gas. After nightfall, demonstrators threw Molotov cocktails, setting fire to more than 40 buildings, including a historic theater in downtown Athens, the worst damage in the city since May 2010, when three people were killed when protesters firebombed a bank. There were clashes in Salonika in the north, Patra in the west, Volos in central Greece, and on the islands of Crete and Corfu.

Greece and its foreign lenders are locked in a dangerous brinkmanship over the future of the nation and the euro. Until recently, a Greek default and exit from the euro zone was seen as unthinkable. Now, though experts say that the European Union is not prepared for a default and does not want one, the dynamic has shifted from trying to save Greece to trying to contain the damage if it turns out to be unsalvageable.

“They’re trying to lay the ground for it, trying to limit the contagion from it,” said Simon Tilford, the chief economist at the Center for European Reform, a research institute in London. Still, he added, letting Greece go would set a dangerous precedent, and it would be “fanciful” to think otherwise.

Greece’s limping economy yields large trade and budget deficits, and none but the European Central Bank, the European Commission and the International Monetary Fund — known collectively as the troika — are willing to lend the nation the money it needs to stay afloat. The troika is demanding more concessions to placate Germany and other northern European countries, where the bailout of Greece is a hard sell to voters. For its part, Greece is trying to preserve social and political cohesion in the face of growing unrest, political extremism and a devastated economy that is expected to worsen with more austerity. And the feeling is growing here and abroad that the troika’s strategy for Greece is failing.

The leaders of two of the three major political parties in Prime Minister Lucas Papademos’s interim coalition government — the Socialists and the center-right New Democracy party — agreed on the new round of austerity after days of tense debate, maneuvering and threats. The leader of the third, the right-wing Popular Orthodox Rally, refused to endorse the measures and later withdrew from the coalition.

In the debate on Sunday night before the vote, Mr. Papademos appealed to lawmakers to do their “patriotic duty” and pass the measures, saying they would be saving Greece from bankruptcy in March, when a bond issue comes due that Greece cannot repay without foreign help.

In a sign of how the crisis has frayed the political order in Greece, the three leading political parties all moved swiftly to expel lawmakers who had broken ranks with leaders in the voting.

Mr. Papademos is a former vice president of the European Central Bank who took office in November with a mandate to negotiate the new loan agreement before new elections are held, perhaps as soon as April. He acknowledged on Sunday that the program “calls for sacrifices from a broad range of citizens who have already made sacrifices.” But the alternative, he said, “a disastrous default,” would be worse.

European Union finance ministers, who were expected to approve the agreements with Greece at a meeting in Brussels last Thursday, instead sent a vote of no confidence, asking Greece for another $400 million in spending cuts.

When they meet again on Wednesday, they are expected to sign off on the measures and raise the stakes. A major topic of discussion is expected to be establishing an escrow account that would hold new money lent to Greece, and using it first to pay creditors, before the Greek government can tap it for any other purpose. The idea, backed by Germany and the Netherlands, may make further loans to Greece more palatable to German voters, but many Greeks see it as a fundamental loss of sovereignty and feel that they are being pushed into poverty to appease banks.

“Greece will become a protectorate,” said Natalia Stefanou, 45, a shoe store employee at a protest outside the Parliament on Sunday. She said she had not been paid since September and may soon lose her job entirely. “It’s not me I’m worried about, though,” she said. “I’ve got two children, aged 14 and 15. What kind of country are we going to leave them?”

Anti-German sentiment is also on the rise in Greece, where memories of the Nazi occupation during World War II are still vivid. “This is worse than the ’40s,” said Stella Papafagou, 82, who wore a surgical mask at the demonstration to fend off the tear gas. “This time the government is following the Germans’ orders. I would prefer to die with dignity than with my head bent down.”

European leaders, fearful that Greece’s crisis will undermine efforts to help other euro nations like Portugal and Spain, have been trying directly or indirectly in recent days to paint Greece as a special case, whose leaders have failed to transform its troubled and corrupt state fast enough. In an interview last week, the Italian prime minister, Mario Monti, said that in the highly unlikely event of a Greek default, “there would be extremely strong political policy and political responses to prevent any such phenomenon to go beyond Greece.”

Similarly, Fabrizio Saccomanni, the director general of the Bank of Italy, told reporters last week, referring to the risk of “contagion,” that “market indications seem to suggest that this problem is seen as minor.”

But others say that is wishful thinking. “If one country in the monetary union can default, so can another — that is one simple inference that bank managers and hedge fund mangers can infer, no matter what Mrs. Merkel or Mr. Sarkozy may say,” said Costas Lapavitsas, an economist at the University of London, referring to Chancellor Angela Merkel of Germany and President Nicolas Sarkozy of France.

“Portugal and Ireland have unsustainable debt,” he said. “Put two and two together, and it makes four.”

Mr. Lapavitsas, who has been calling for Greece to go ahead and default on its own terms, added that it was “absolutely unacceptable that this huge amount of Greek debt that ties the country hand and foot should be dealt with by some unnamed and obscure technocrats and unelected people.”

If Greece dug itself into a hole by borrowing beyond its means, as many argue, there is also a growing sense that the troika’s austerity regimen of spending cuts and tax increases is burying Greece alive in that hole. “The reason Greece is in this position is because of the strategy the troika imposed upon it,” said Mr. Tilford, of the Center for European Reform.

“The I.M.F. has never approached a country like this,” he said. “With this much austerity, it would always have a huge devaluation, too.”

Financial analysts said they expected investors to welcome news of the vote in Parliament.

“It’s a pause, it’s a relief,” said Milton Ezrati, the senior economist and market strategist at Lord Abbett & Company. “But it’s short-lived and everyone knows that. We’re buying a few more months before the next round of trouble.”

“It doesn’t solve the problem,” Mr. Webman said, “but it gives everybody the political cover to look for ways to solve the real Greek problem, which is how to get the country and its economy back on more stable footing.”

With more wage cuts and tax increases expected, Greeks are growing increasingly angry at their own lawmakers as well as the troika of lenders.

“They’ve all sold out in there, they should be punished,” said Makis Barbarossos, 37, an insurance salesman, as he waved a cigarette toward Parliament on Sunday. “We should put them in small, unheated apartments with 300-euro pensions and see, can they live like that? Can they live how they’re asking us to live?”

Niki Kitsantonis reported from Athens, and Rachel Donadio from Rome. Julie Creswell contributed reporting from New York, and Elisabetta Povoledo from Rome.

This is about valueation, and valueation is different for different entities

Case 1:In an island with only 2 people, A capture 1 fish and B pickup 1 basket of fruits every day, and they both can not do the other's work, they will be happily exchange their daily products equally, it means the value of 1 fish equal to 1 basket of fruits

Case 2:A capture 1 fish while B pick up 2 baskets of fruits every day, then the value of 1 fish will equal to 2 baskets of fruits, since fishes are difficult to get and fruits are easy to pick

But in real world, history price are critical, it means, if Case 1 happens before Case 2, then after B picked up 2 baskets of fruits, he will still be able to exchange 1 fish with 1 basket of fruits, and keep the rest 1 basket of fruits

This is more or less what happened in EU: Germany increased their productivity by 100%, but still keep the price of their products the same, while Greece still keep the original productivity. It means: Greece have to use 1 day's labor to exchange 1/2 days's labor from Germany. Given the same amount of loan, Greece worker have to work 10 hours to payback the loan, but Germany worker only need to work 5 hours

Somebody might ask: Why don't Greece also increase their productivity? In my opinion, they have the right to live a low productivity life, the person who give them a loan which is much higher than their productivity is the one to blame

This is about valueation, and valueation is different for different entities

Case 1:In an island with only 2 people, A capture 1 fish and B pickup 1 basket of fruits every day, and they both can not do the other's work, they will be happily exchange their daily products equally, it means the value of 1 fish equal to 1 basket of fruits

Case 2:A capture 1 fish while B pick up 2 baskets of fruits every day, then the value of 1 fish will equal to 2 baskets of fruits, since fishes are difficult to get and fruits are easy to pick

But in real world, history price are critical, it means, if Case 1 happens before Case 2, then after B picked up 2 baskets of fruits, he will still be able to exchange 1 fish with 1 basket of fruits, and keep the rest 1 basket of fruits

This is more or less what happened in EU: Germany increased their productivity by 100%, but still keep the price of their products the same, while Greece still keep the original productivity. It means: Greece have to use 1 day's labor to exchange 1/2 days's labor from Germany. Given the same amount of loan, Greece worker have to work 10 hours to payback the loan, but Germany worker only need to work 5 hours

Somebody might ask: Why don't Greece also increase their productivity? In my opinion, they have the right to live a low productivity life, the person who give them a loan which is much higher than their productivity is the one to blame

-1, sorry.

This is about fiat money. The stuff can be created in limitless quantities with no effort. Fruits and fish are not like that, so your analogy is a fail from the start.

Try something like: A print 1 euro while B print 1 drachma. A print 10m euro and give to B, in exchange B agree to go live in Monaco and not print any more drachma. Old neighbors of B now fish and grow olives for A in exchange for newly printed euro. Economists say A very productive, in return these economists also can have some of the newly printed Euro.

It has to do with a country's government ability to loan money and spend it without its corresponding taxation. Greece outspent itself knowing it would be bailed out by the rest of EU. Germany and the other countries know this and refuse to have to extend a hand to a country who keeps on sustaining a huge lazy bureaucracy and absurd subsidies, so they force the Greek government to cut down, and of course the already lazy and freeloading population protests. Unfortunately there is no way to fix this because the Greek economy is already tied down to the EU so there is no "foreign" investment that can counterbalance the severe austerity measures imposed.

The "contagion effect" so much feared here is that all European countries are actually doing what Greece is doing to varying degrees, even Germany.

You cannot have economic union without its corresponding political union.

It has to do with a country's government ability to loan money and spend it without its corresponding taxation. Greece outspent itself knowing it would be bailed out by the rest of EU. Germany and the other countries know this and refuse to have to extend a hand to a country who keeps on sustaining a huge lazy bureaucracy and absurd subsidies, so they force the Greek government to cut down, and of course the already lazy and freeloading population protests. Unfortunately there is no way to fix this because the Greek economy is already tied down to the EU so there is no "foreign" investment that can counterbalance the severe austerity measures imposed.

The "contagion effect" so much feared here is that all European countries are actually doing what Greece is doing to varying degrees, even Germany.

You cannot have economic union without its corresponding political union.

Just like in a big family, usually the hard working brother end up paying the debt for his playboy brother, there's no fairness. If those Europe countries want to combine to a big union, some countries are destined to sacrifice something, and although some other countries consume more than they produce, they still think that they are treated unfairly

Fairness or justice is just a feeling, each person/country have different personality/culture/climate/value, money is not a good benchmark to measure the fairness, it just forced everyone to accept same value, which in turn become slaves of money

You cannot have economic union without its corresponding political union.

True, but you can easily have a currency union without political union. For example, many countries use the US dollar or peg to the US dollar.

Greece could stay in the Eurozone, but the Greek government could default on its debt repayments. Of course, no-one would lend any more money to the Greek government. The government would immediately have to start spending within its means, and is that a bad thing?

But this crisis isn't about that. This crisis is about finding ways to keep Europe chugging along without exposing the folly of exponentially-increasing government debt.

That is a very good analogy, and you are right about each country having a different personality/culture/climate/value. Southern countries for example tend to have a more relaxing culture because they don't experience the harshness of winter so much, so they don't save for difficult times. I know this perfectly because I am a dual national - Mexican-American and know both cultures very well.

You cannot have economic union without its corresponding political union.

True, but you can easily have a currency union without political union. For example, many countries use the US dollar or peg to the US dollar.

Greece could stay in the Eurozone, but the Greek government could default on its debt repayments. Of course, no-one would lend any more money to the Greek government. The government would immediately have to start spending within its means, and is that a bad thing?

The debt of the Greek government is so bad that if they default, it would completely colapse, all services suddenly cutoff probably leading to dangerous anarchy if not outright revolution. So yes, now it would be a bad thing. The EU should not have allowed Greece to be so heavily indebted but they could not force them, because it is a political issue. The greek government "decided" on that.

Quote

But this crisis isn't about that. This crisis is about finding ways to keep Europe chugging along without exposing the folly of exponentially-increasing government debt.

The debt of the Greek government is so bad that if they default, it would completely colapse, all services suddenly cutoff probably leading to dangerous anarchy ...

A short, sharp, shock is the least painful way out of Greece's mess. Anything else is just delaying the solution and storing up even bigger problems for the future.

I don't agree. Sovereign debt is like a an addictive drug. A country needs to gradually wean of its debt or else it is like a shock to its system and can actually kill it. Imagine the EU as a bunch of drunkards who need to quit drinking and get back to work, Greece being the worst of them. If you suddenly cutoff the alcohol to Mr. Greece, he will go into shock and the rest of the drunks are going to panic and everything collapses.

True, but you can easily have a currency union without political union. For example, many countries use the US dollar or peg to the US dollar.

Greece could stay in the Eurozone, but the Greek government could default on its debt repayments. Of course, no-one would lend any more money to the Greek government. The government would immediately have to start spending within its means, and is that a bad thing?

The debt of the Greek government is so bad that if they default, it would completely colapse, all services suddenly cutoff probably leading to dangerous anarchy if not outright revolution. So yes, now it would be a bad thing. The EU should not have allowed Greece to be so heavily indebted but they could not force them, because it is a political issue. The greek government "decided" on that.

Quote

But this crisis isn't about that. This crisis is about finding ways to keep Europe chugging along without exposing the folly of exponentially-increasing government debt.

Also true. Even the U.S. is at risk of this "contagion".

I'm still confused by the fact that in a day that money can be freely created out of thin air, such debt will still make so much pain...

Imagine 2 cases:

Case 1: ECB just printed several trillions of euro and lend it to greece for 50 years, then greece will have plenty of cashes to spend: They hire all the leading construction companies to rebuild their country and buy what ever high tech/luxury things made in France/Germany to decorate their home

Case 2:Greece suddenly find out an area rich of petroleum near their sea shore, it worth several trillions of euro, and ECB have to print several trillions of euro to trade these petroleum(otherwise the deflation will destroy europe). Then, Greece hire all the leading construction companies to rebuild their country and buy what ever high tech/luxury things made in France/Germany to decorate their home

Comparing these 2 cases, in the first one, Greece produced nothing, in the second one, Greece also produced nothing, but they find something others want. Most of people will accept case 2 but not case 1

Why? I guess down to the basic, it is about fairness or justice:

If Greece can get free money and spend, why France and Germany can not? If anyone can just print money and do not need to work, then there will be no one making the real products, people will soon find out the money have nothing to purchase, then the monetary system will collapse

But strangely, if Greece happened find lot's of petroleum, then no one will argue about it when they get same trillions of euro from ECB, although they still do not work, but now they have something that others want

See? As long as you can provide something that others want, you will be fine. It seems this is the common sense when people are looking at economy related phenomenon, it also means: If you can not impress others with your products/services, you will have trouble

So I think, the real problem of Greece now is that they can not provide something that impress others

Why do people need to impress others with their products/services? I remember there is a chinese saying: In society, everyone is a beggar, the big beggar make big money and the small beggar make small money

True, but you can easily have a currency union without political union. For example, many countries use the US dollar or peg to the US dollar.

Greece could stay in the Eurozone, but the Greek government could default on its debt repayments. Of course, no-one would lend any more money to the Greek government. The government would immediately have to start spending within its means, and is that a bad thing?

The debt of the Greek government is so bad that if they default, it would completely colapse, all services suddenly cutoff probably leading to dangerous anarchy if not outright revolution. So yes, now it would be a bad thing. The EU should not have allowed Greece to be so heavily indebted but they could not force them, because it is a political issue. The greek government "decided" on that.

Quote

But this crisis isn't about that. This crisis is about finding ways to keep Europe chugging along without exposing the folly of exponentially-increasing government debt.

Also true. Even the U.S. is at risk of this "contagion".

I'm still confused by the fact that in a day that money can be freely created out of thin air, such debt will still make so much pain...

Imagine 2 cases:

Case 1: ECB just printed several trillions of euro and lend it to greece for 50 years, then greece will have plenty of cashes to spend: They hire all the leading construction companies to rebuild their country and buy what ever high tech/luxury things made in France/Germany to decorate their home

Case 2:Greece suddenly find out an area rich of petroleum near their sea shore, it worth several trillions of euro, and ECB have to print several trillions of euro to trade these petroleum(otherwise the deflation will destroy europe). Then, Greece hire all the leading construction companies to rebuild their country and buy what ever high tech/luxury things made in France/Germany to decorate their home

Comparing these 2 cases, in the first one, Greece produced nothing, in the second one, Greece also produced nothing, but they find something others want. Most of people will accept case 2 but not case 1

Why? I guess down to the basic, it is about fairness or justice:

If Greece can get free money and spend, why France and Germany can not? If anyone can just print money and do not need to work, then there will be no one making the real products, people will soon find out the money have nothing to purchase, then the monetary system will collapse

But strangely, if Greece happened find lot's of petroleum, then no one will argue about it when they get same trillions of euro from ECB, although they still do not work, but now they have something that others want

See? As long as you can provide something that others want, you will be fine. It seems this is the common sense when people are looking at economy related phenomenon, it also means: If you can not impress others with your products/services, you will have trouble

So I think, the real problem of Greece now is that they can not provide something that impress others

Why do people need to impress others with their products/services? I remember there is a chinese saying: In society, everyone is a beggar, the big beggar make big money and the small beggar make small money

Is there any other better way?

What is alarming of Greece's debt is its proportion to their GDP. Of course Greece produces stuff and "impresses" others, but it is not enough in proportion to what they owe. Money can be created out of thin air as long as there are reasonable enough goods and services produced (moderate inflation), but if too much money is created without its equivalent production of goods and services you can either default on the loans or absorb this money in the economy creating hyperinflation.

What is alarming of Greece's debt is its proportion to their GDP. Of course Greece produces stuff and "impresses" others, but it is not enough in proportion to what they owe. Money can be created out of thin air as long as there are reasonable enough goods and services produced (moderate inflation), but if too much money is created without its equivalent production of goods and services you can either default on the loans or absorb this money in the economy creating hyperinflation.

Actually I have never bought the idea that more money will cause inflation, especially in developed countries (A millionare get 1 more million, would he push all the price of living material up? very unlikely)

Same for Greece: Greece GDP is only a couple of procent of whole EU economy, even issue them a loan as big as their GDP, the money supply for EU will barely increase by a couple of procent. Comparing with what FED has done after financial crisis (print 400%+ more money), this can almost be ignored

And for debt mathematics: If this year your debt is 1 million, and your production is 1 million, then debt rate is 100% of GDP, seems quite risky. But what if next year your income increased to 4 million, then from next years perspective, your loan is only 25% of the GDP, totally acceptable. So the key point here is to increase the income for next year. How to increase the income is the quesion, and income have very close relation to the loan that others can get and spend, so it's a chicken and egg problem again

True, but you can easily have a currency union without political union. For example, many countries use the US dollar or peg to the US dollar.

Greece could stay in the Eurozone, but the Greek government could default on its debt repayments. Of course, no-one would lend any more money to the Greek government. The government would immediately have to start spending within its means, and is that a bad thing?

The debt of the Greek government is so bad that if they default, it would completely colapse, all services suddenly cutoff probably leading to dangerous anarchy if not outright revolution. So yes, now it would be a bad thing. The EU should not have allowed Greece to be so heavily indebted but they could not force them, because it is a political issue. The greek government "decided" on that.

Quote

But this crisis isn't about that. This crisis is about finding ways to keep Europe chugging along without exposing the folly of exponentially-increasing government debt.

Also true. Even the U.S. is at risk of this "contagion".

I'm still confused by the fact that in a day that money can be freely created out of thin air, such debt will still make so much pain...

Imagine 2 cases:

Case 1: ECB just printed several trillions of euro and lend it to greece for 50 years, then greece will have plenty of cashes to spend: They hire all the leading construction companies to rebuild their country and buy what ever high tech/luxury things made in France/Germany to decorate their home

Case 2:Greece suddenly find out an area rich of petroleum near their sea shore, it worth several trillions of euro, and ECB have to print several trillions of euro to trade these petroleum(otherwise the deflation will destroy europe). Then, Greece hire all the leading construction companies to rebuild their country and buy what ever high tech/luxury things made in France/Germany to decorate their home

Comparing these 2 cases, in the first one, Greece produced nothing, in the second one, Greece also produced nothing, but they find something others want. Most of people will accept case 2 but not case 1

Why? I guess down to the basic, it is about fairness or justice:

If Greece can get free money and spend, why France and Germany can not? If anyone can just print money and do not need to work, then there will be no one making the real products, people will soon find out the money have nothing to purchase, then the monetary system will collapse

But strangely, if Greece happened find lot's of petroleum, then no one will argue about it when they get same trillions of euro from ECB, although they still do not work, but now they have something that others want

See? As long as you can provide something that others want, you will be fine. It seems this is the common sense when people are looking at economy related phenomenon, it also means: If you can not impress others with your products/services, you will have trouble

So I think, the real problem of Greece now is that they can not provide something that impress others

Why do people need to impress others with their products/services? I remember there is a chinese saying: In society, everyone is a beggar, the big beggar make big money and the small beggar make small money

if you have your cash in a german bank i'm afraid you have to lose it. This would cause devastation. but you can't have double standards otherwise people are going to continue putting money in places they don't understand. I called both my banks a couple of months ago to ask how well capitalised they are and they couldn't tell me.

My question is, if this domino effect is followed where does the cash exit the euro zone? Cash isn't disappearing; it's moved. There's a creditor somewhere and to identify this might help unify the eeu.

Case 2:Greece suddenly find out an area rich of petroleum near their sea shore, ...

You missed an important point on that. Then we are facing another war between Turkey and Greece.So both are buying more german tanks, thus it is easy for germany to hold their debts ...You see in case 2 there are no problems at all.

The paining (sic!) is done with the QPainter class inside the paintEvent() method.(source: my internet)

An overstatement IMO. If Greece is kicked out of the EU and the Euro,it'll certainly be a black eye for the EU but certainly not its downfall.

You got exactly what I thought of, Could have said cornerstone of a larger puzzle. If you take it away it starts to break up. Plus the whole stuff is pretty interconnected.To germany it is more than just econonmy, an unerstricted yes to Europe is a core statement in Mrs. Merkels policy.Inhouse she lost 2 Presidents in the past few years plus she opposed the new one (to come) heavily in the past.Thus she badly needs some outstanding outdoor success. France (its banks) were heavily involved plus are a bit shaky, while she likes Sarkozy to be relected. ... just scratching the surface. But I think one can easily grasp where the road ist heading to.

and those banks failed at what is essentially their primaryresponsibility: risk assessment.

Yes and for this reason I cannot wait until they default and the entire world economy crashes - once it does all the corrupt bankers, their politicians and other filth will be carved out of the system.

What will be left is the real economy: The struggling innovator, the hard manual worker, investors investing in real technology and development, the engineers, the farmers and the scientists.

I hope the Germans wake up, see that Merkel is selling them out to Goldman Sachs and kicks her out for some anti-EU politician.